ACT Apartments in Canberra - have they hit bottom yet?

So the past couple of years, Canberra apartments have not done very well. Just so many popping up - all the way down Flemington Rd are apartments, and tons being built in Belco, Civic etc.

So apartment prices have definitely come down due to the oversupply. So the question is, what about now? Have prices fallen enough that it can't get any lower? I've seen new apartments on Flemington Rd advertised for about 300k - surely they can't fall lower than that right?

I'm considering buying an apartment in Braddon or Turner - the whole area seems to be modernising. No longer are there car yards etc. - it just seems to be hipster cafes and fancy restaurants. It's a long play as whilst I don't think they'll fall further, I feel they'll plateau for a while - at least until most of the developments are finished. But since rents are raising, it might be a good time to get in now.

What are people's thoughts?

 

Ugly as. Not your intentions but the very sight of the awful things. Although pps have to live somewhere I guess.

 

There are many new developments still being built so I think the potential for further falls is definitely there

 

True, and strata, land tax and rates are all going up...

still, how cheap could they get? I mean, what could the cheapest possible price be for a new apartment in Canberra? 250k? 200k???

 

The prices at present for new builds make no sense. There are new one bedders in say Belconnen selling for 400-450k when 1-2km down the road in Page/Scullin you can buy a 3 bedroom house on a 800sqm block for like 550-600k.

 

If its not $0 yet it can get lower.

 

I see your point re how low can they go but i still dont see the point.

still a lot of supply to come. Eg 500 apartments here , the carpark diagonally opposite that still be developed sooner rather than later too.
Throw is land tax etc as you said, seems like far better CG odds elsewhere

 

Up in Darwin the apartment glut also destroyed the prices of duplexes and townhouses. Don't know if that's the case in Canberra, but if it is use it to your advantage and pick up a townhouse whilst everyone is jumping up and down about the losses on their apartments.

A townhouse/duplex will always be a safer bet over time due to the land component. Also can be rented more easily to pet owners and families.

 

Townhouses are can work but the good ones in better suburbs in Canberra are still pretty expensive.

 

Hey Roger

If possible - I'd look to stick with a detached house. They've historically done well (in terms of growth) over units.

I've owned all sorts - townhouses, units and houses and the houses have out performed by a huge margin.

Cheers

Jamie

 

I would avoid units in Canberra (unfortunately I still own one). I fear there is further room to go downwards in units, but Turner/Braddon should hold value.

Interestingly rents are rocketing up in Canberra, seemingly in relation to the significant increase in land tax by the ACT Government. Even still the net yields are and will stay pitiful.

The one positive here is that you will rarely have vacancies on nice units and if you choose well the tenants are excellent.

 

So I've heard. So what is actually the attraction of a detached house? Is it the fact that it is seperate title or the fact the houses aren't touching?

Like would it be better to buy a townhouse which is connected but have seperate titles, or is it better to buy a "standalone house" in a complex for which you'll have to pay some sort of body corporate?

 

So what exactly should be a good net yield? Excuse me if that sounds naive - it's a serious question. Just cause, I notice that Canberra yields do seem a whole higher than say Sydney or Melbourne but I just want to know what I should be searching for.

In fact, I have a current investment property (townhouse with seperate title) and even from the moment I bought it, the rent was already covering the interest payments. Taking into account all the costs like rates, land tax, utility etc. it basically costs about 3k more than I received in rent.

I suppose with the low interest rates, right now, it's easy to have the rent cover most of it but just wondering for future properties, what kind of yield I should be looking for.

 

I would be interested to know what net yields you are getting. As an example I was getting 3.6% in the last financial year, which was pretty rubbish. While rents are increasing, most unit land tax increased by 20% for this current FY.

I know there are a number of well known property investors and professional advisors who draw a line through Canberra due to the land tax issue. It isn't uncommon to see 4 bedroom houses facing $5k a year in land tax when rented out.

I just went had a look at a 3b2b detached house in Ainslie for instance with the following key stats:

Vital Statistics


EER: 2.0
Unimproved Value: $705,000
Rates: Approx. $3,923 pa (Assuming residential)
Land Tax: Approx. $7,329 pa (If rented out)

 

What is your budget? I wouldn't touch ACT units with a 10 ft pole considering the huge oversupply going on, land tax, rates and body corporate makes them difficult to positively gear (of course depending on your leverage) and they do not go up in value (well not at the moment at least) so I don't see how you can possibly benefit from them. Though, if you felt obliged to buy one, go for an older complex with not so many units so you have some land component. Hackett (Madigan/Rivett Street Complexes), Watson (Knox Street Complexes), Campbell (Blamey Cres/Chauvel Street Complexes), Yarralumla (Hampton Circuit Complexes), or Red Hill (Can't remember where but they come up for sale pretty often).

Alternatively, take your money to Brisbane, buy a house that doesn't have any land tax (Until UV $600,000+), no body corporate fees, similar yield and will actually go up in value.

Hope this helps :~)

 

From my limited experience, it seems like units in Barton hold their value quite a bit but they are on the more pricey side so for that kind of outlay, I would just get a house.

 

Not sure why you think Canberra doesn't go up in value. There has been a 20-25% increase in my area in the last 2-3 years. While land tax is annoying to pay, I think it actually makes the property market here more stable

 

Based on the rent and the price we bought it at, gross yield (do you calculate with or without the stamp duty?) is about 5.1% not including the stamp duty or 4.9% including stamp duty.

But I guess net yield would probably be about 3.6% - especially since we had it vacant for the first month or so after we bought it, we did some repairs on it, depreciation schedule etc.

So 3.6% isn't okay? Cause my interest rate is fixed at 3.9% - so that's almost all of the interest and then just need to pay for rates, utilities etc.

Yeah that's insane about the land tax in Ainslie. Mine is definitely not that high - does land tax include rates or do we have to pay both?

 

You need to pay both

 

Was referring to units rather than the market as a whole, houses are going gangbusters. I'd be interested in what area are you referring to if you mean units have gone up 20-25%?

Check out some of these ones on RPData > 7/51 Hampton Circuit, Yarralumla, Traded $253,000 14/10/2008, just sold 19/06/2017 for $220,000, -$33,000 over a 9 year period...

6/16 Discovery Street, Red Hill, Sold 09/05/2007 for $290,000, sold again 07/12/2016 for $292,500.

7/62 Knox Street, Watson, Sold 17/02/2010 for $297,000, sold again 17/10/2016 for $248,000.

Of course... Past performance is no guarantee of the future... But look at attached unit approvals and make a judgement of where you think supply is going to be in 2 - 4 years.

Stay woke... dun touch units